Financial Challenge – Day 5

NOTE: The entire challenge series is what I would do with my money and is merely my opinion. You should do thorough research and seek professional advice and decide to do what is best for you. My Disclaimer

Welcome to the second week of the Financial Challenge. While we spent some time last week looking how people with credit card debt should allocate the money that they will be saving, we also need to take a look at how those who are already ahead in the game and have extinguished their credit card debt should allocate the money that they’ll save. Once we have established where the money should be going, then we can get into the meat and potatos of getting your personal finances in or

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18 Responses to Financial Challenge – Day 5

  1. Bill says:

    Great challenege – I can’t think of any circumstances where I would forego the company match on my 401(k), which is dollar-for-dollar up to 6%.

  2. EHadden says:

    Unfortuantely, I work for a public school district, which does not have a 401(k). We do, however, have a 403(b) program, but there is no match there. Until the wife and I manage to dig out of this hole that we are in, I will not be participating, although I know that I am missing out on some incredible compounding opportunities.

  3. ~Dawn says:

    I agree with Bill- I wouldn’t pass up free money. Ever!
    My company does the same match as his.

  4. Rob says:

    This is the best advice anyone could ever get.

    I started at age 23 contributing 6% with a 50% ER match. Four years later 8%. Six years later 10%. Now maxing it out.

    I just turned 36. If I never contribute another dime to this plan and get an 8% return I’ll have $1.2 million at age 65.

    All because I filled out one form at age 23.

  5. Frugal Momma says:

    Been already done with hubby’s 401k for several years. My goal by the end of the year is to be 15%. I don’t have a 401k but a Roth but I am maxing it out and it is diverisifed

  6. piannist says:

    Any advice on this would be appreciated: My husband contributes 5% to his 401k and there is no company match. We have several thousand in credit car debt/car loans, etc. I’m thinking we need to reduce the contribution to start paying some of this down, but he thinks we should keep the same contribution since it’s tax free. I just think we’re losing more in the long run. Also, if car loans are at the same rate as our higher interest credit cars (which still isn’t too high, but it’s something), wouldn’t we want to make paying those down a priority? Pay loans first? Reduce contribution? What do you think?

  7. pfadvice says:

    “Any advice on this would be appreciated: My husband contributes 5% to his 401k and there is no company match. We have several thousand in credit car debt/car loans, etc. I’m thinking we need to reduce the contribution to start paying some of this down, but he thinks we should keep the same contribution since it’s tax free. I just think we’re losing more in the long run. Also, if car loans are at the same rate as our higher interest credit cars (which still isn’t too high, but it’s something), wouldn’t we want to make paying those down a priority? Pay loans first? Reduce contribution? What do you think?”

    I have posted your question in the forums as you will likely get a lot more answers to it there (and varying opinions).

  8. Perky says:

    If there is no match, and we do have debt, we shouldn’t sign up right?

    What if the debt we have is only the house and car(3 or 4 months we should be there!)? should we sign up with no match or wait still?

  9. flash says:

    Perky has a good point. My first several jobs had great 401K matching and other retirement savings. My position with the might F500 had no match. The 401K is still critical to have, tax free money set aside and making money. For me, I spread over various accounts, stocks was only a partial investment, and have done very well. I don’t think all in stocks with no match is ideal unless you have access to some great funds in your program.

  10. pfadvice says:

    “If there is no match, and we do have debt, we shouldn’t sign up right? What if the debt we have is only the house and car(3 or 4 months we should be there!)? should we sign up with no match or wait still?”

    Getting ahead in the game ;) Wait until tomorrow’s challenge – but the answer is “no” to begin with. There is a better investment than the 401(k) if your company doesn’t match the money.

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  12. Loi Tran says:

    I’d pay down the car loan first since you are not getting any company match. The returns you are going to get in your 401k are not guaranteed, but when when you pay down your debt, the savings from the interest payments are.

  13. Loi Tran says:

    As for investing in a portfolio, I’d put a small amount into a bond fund. Somewhere along the lines of 5%-20%. Bonds are not correlated to stocks and studies have shown that bonds may improve a portfolio’s risk adjusted returns. I’ve written a post about bonds in a portfolio. http://investingguide.blogspot.com/2006/01/bonds-in-portfolio-for-young-people.html

  14. Perky says:

    Thanks pfadvice :)

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  17. Floyd Grier says:

    What is the up side putting your money in a 401k plan with no company match

  18. pfadvice says:

    Not much. The main one would be convenience. If you woulddn’t be saving the money in some other way for retirement, then it could be positive.

    If you company offers an investment vehicle that is better than you can find elsewhere (doubtful) it could be better.

    And it could be better if the alternative investment where the money would go would not be tax deductible.

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